Why Employee Retention is so important for any Organization.
Employee retention has been a focus of HR for a long time, probably for as long as there has been HR. It’s evident that retaining employees is good, but the full impact of retention is often not recognized. So, why is employee retention so important, especially now?
Why employee retention is important for any organization?
1. Turnover is Expensive.
It costs more to replace an employee than meets the eye. It’s common to think that it costs $5,000 – $10,000 to replace an employee earning $50,000. This works out to 10% – 20% of the annual compensation for the position.
This perception fails to account for many very real costs, such as offboarding, onboarding, relocation, training, and the loss of work while acclimating new employees. The reality is that in the US, replacing an employee costs between 40% and 60% of their annual compensation. For a position with critical skills, it can cost over 100% of annual compensation.
Here is what it costs most organizations to replace an employee:
|Task||% of salary|
|Impact on team||10%|
Employee with Critical Skills
|Task||% of salary|
|Impact on team||15%|
So, we’ve established that turnover is costly terms of hard cash. Other very real costs are harder to measure. Turnover is tough on morale. Teams take a hit when losing a contributor. Work must be redistributed, and the team faces the uncertainty of a new resource. When a top performer leaves, the loss of knowledge and work output hit a team especially hard. It’s especially tough on managers, who are responsible for replacing employees while keeping the team running.
The worst case is when a team experiences multiple exits in a short time. The remaining members wonder if the grass is greener in a different pasture. A little turnover easily leads to a critical situation. The current climate makes retention particularly challenging. Several present factors are contributing to a significant rise in turnover. Some of these factors will be around for a long time:
- Millennials (about 50% of the workforce) need new challenges to stay engaged. If they’re not developed at their current job, they’ll find career growth somewhere else.
- We’re facing a wave of retirements of the skilled workforces in many established industries.
- Unemployment in the US is very low. It’s hard to find new employees and existing ones are lured by opportunity.
So, what do we do? We established that retention is essential on many levels. Now we’d like to do something about it.
2. Veteran Employees Add Value
Competent and experienced employees have a market of their own in the employee market. Organizations need to make them feel that they are respected. Workplaces benefit from long-term employees. Every company, be it small or big, should take the time to check-in with experienced employees. They should feel that they are valued. It can reduce high employee turnover.
Experienced employees are valuable employees, and their departure can set back project timelines and in some cases, trigger the exit of other workers too! Companies need to understand the importance of employees who spend considerable time with them. Understand their career goals and work with them to achieve their goals. Making them feel home is what employee engagement is all about! Exploring new roles and responsibilities along with appropriate increases in compensation goes a long way in reducing turnover rate.
3. Bad Hires Hurt Morale
When companies fire bad hires, they harm the morale of other dedicated employees in the organization. The workers may start to wonder if their jobs are secure. They may also doubt the competency of the company’s management.
Understanding job candidates in and out, verifying their background, providing them appropriate training, and having a transparent, onboarding process can reduce bad hires. Hiring the right employee is crucial to improve employee retention rates.
4. Your Competitors Benefit Directly!
Companies put employee retention strategies in place to keep them away from their competitors. When a talented employee quits, he is either going back to school, moving to another location, or looking for a better career opportunity.
When you lose a quality employee, you run the risk of him ending up working for your competitor — a clear case of wasted money, time, and employee improvement programs. The best way to keep them away from competitors is to improve retention.
People Analytics to The Rescue
Here is where People Analytics come to the rescue. We have a lot of people data in our HCM systems. We can use new technology to analyze this data and answer the tough questions.
- Start with basic people analytics to understand the underlying health of the organization. Headcounts, turnover & retention rates should be known for every department and leader. We must understand the problems before we can address them.
- Use HR predictive analytics to address the future
- Forecast the risk of employee exits. This uses historical data and tells us which people are likely to exit soon. Focus on top performers, critical skills, and other regrettable exits.
- Identify exit drivers to learn why employees are likely to exit.
- Address exit drivers in a targeted fashion. If a team’s exit drivers are around training, consider investing more in learning. If top performers’ exit drivers are related to compensation, we look there.
- Using recruitment analytics, review your candidate experience to improve your employer brand. An employee makes their first impression of an organization during the hiring process. A less-than-elegant candidate experience reduces the long-term outlook for employees.
So, there’s a lot we can do to improve employee retention. Many of these options weren’t available a decade ago. Technology provides many new opportunities to improve.
Unlock the 7 Benefits of Data-Driven Business Strategy
Data is more of a compulsion than an option these days for any organization looking to leave a footprint in today’s competitive market. It is the oil that every business needs to unlock its full potential. It empowers businesses to make data-driven decisions and deliver personalized experiences to customers.
What do you mean by Data-Driven Organization?
Data-driven organizations depend on vast volumes of data and smart data analytics tools to quicken their business decision-making processes. They capture data and give context to it by describing who has the access, where it’s from, and how it is used. Data-Driven organizations use predictive analytics and smart data reporting tools to gain better insights.
What are the data-driven business strategies?
Data Analytics and Big Data are at the pinnacle of any corporate agenda. They have transformed the way performance is delivered, and the way organizations do business. When we combine data-driven business strategy with data analytics, together, they become an essential competitive difference.
The key to form a data-driven business strategy is the combination of four supporting capabilities:
- A data-driven business strategy should be driven by the business and not by technology. Understand what your business needs before defining the tactical elements.
- The organization must be able to identify, combine, and manage multiple sources of data. It is imperative to determine and ensure that the data is secure, timely, and accurate. Inaccurate data leads to wrong insights and ultimately, bad business decisions. Consider data from all the sources, when combined with your data.
- They need advanced data management and data reporting tools to predict and optimize outcomes. Until an organization is ready to leverage all the features of a sophisticated IT system, it should avoid using them. Attention should be paid to data reporting tools, communication tools, and visualization tools.
- A data-driven organization must possess the power to induce a data-driven culture. The culture should focus on educating the organization to acknowledge the insights generated by data. Such a culture then becomes a mindset of continuous improvement, testing, prioritizing, and sharing data with other employees. Data and analytics can then be used to inform and influence others in the market.
Let us now look at the benefits of data-driven business strategy:
1. Increase sales and loyalty
With each trace that a customer leaves behind, he also leaves a treasure of information which gives insights into his/her preferences, beliefs, etc. Using SplashBI, this data can then be used to tailor products and services, in the way the customer wants. With excellent customer experience come high sales and greater customer loyalty.
2. Cut Costs
With such a wealth of information at their fingertips, businesses can easily predict the future and reduce the potential financial impact. Using a data reporting tool like SplashBI can help companies to identify patterns in product and servicing pricing, which help them take appropriate steps and reduce costs.
3. Increase productivity and efficiency
Business Analytics Software like SplashBI help in identifying revenue-generating opportunities, boosting operational efficiencies, and increasing and optimizing production. Businesses can use this tool to forecast needs of the inventory and increase the efficiency of production.
4. Compete with big businesses
Today, most companies have access to an enormous amount of data, but only a few uses it effectively. Businesses which use SplashBI for their reporting needs gain a significant competitive advantage as they build better services and products using insights offered by SplashBI.
5. Process more data
With the rise of AI and IoT, businesses have started collecting more data, and this has made the processing of data difficult. However, companies which use SplashBI can process data faster as it uses AI and machine learning. Processing more data means getting more insights.
6. Understanding what customers want
Most businesses have a fair understanding of who their typical, and ideal customers are; however, SplashBI gives them a whole new level of customer insights. It offers businesses with an in-depth understanding of their potential customers and the kind of products they like. Knowing customers, and the variety of products they want, help enterprises in tailoring future offerings.
7. Reduce risk significantly
Data Analytics tool like SplashBI helps businesses in reducing potential risks. They help giving companies vital insights into the success of new products while keeping in mind their customer base. SplashBI allows businesses to predict early and reduce the risk of asset failure and downtime.
To Sum it up!
The increase in digitization has created patterns, which have pushed organizations to become data-driven. Although technology is essential to organizations, businesses should be driven by a data-driven strategy. To leverage data and analytics, it is imperative that companies have strong leadership, organizational transformation, effective data management, and continuous improvement. Evolving to become a data-driven organization promises competitive differentiation, but requires a disciplined approach.
Try SplashBI’s business analytics solution and explore how the power of reporting and analytics. We help you blend your data and reveal sophisticated insights across various data sources at half the price.